Distinction between profit and loss Account and balance sheet

 

Profit and loss Account:-

1) The main objective of preparing profit and loss Accounts to ascertain the Net profit or Net loss of the business during the year.

2) profit and loss Account contains only Nominal Accounts.

3) All Revenue receipts and Revenue expenditure are recorded in profit and loss Account.

4) it is an Account having ' Debit ' and ' Credit ' .

5) The balance figure of this account is either Net profit or Net loss.

6) Generally it is prepared for year ending.

Balance Sheet:-

1) The main objective of preparing Balance Sheet is to ascertain the correct financial position of the business on a specific date.

2) Balance Sheet contains all  Real and personal accounts.

3) capital Receipts and capital expenditure are shown in the Balance Sheet.

4) It is a statement and hence ' T ' and ' By ' are not used.

5) Balance Sheet will not show any balancing figure. Assets are equal to liabilities.

8) Generally it is prepared for half - year ending or yearly.